Home / Markets / Mark To Market /  Power generation improves in Dec, but demand remains weak

The deceleration in electricity generation abated in December. Total electricity generation declined 2.1% last month, notably lower than the 6.1% fall in November and 12.9% slump in October.

The improvement reflects the incremental increase in economic activity. The Purchasing Managers’ Indices released earlier this week indicate a sequential increase in services and manufacturing activity in December.

Graphic: Santosh Sharma/Mint
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Graphic: Santosh Sharma/Mint

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The recovery is led by the western region, home to a large industrial base and generation capacity. Total generation in the western region grew 3.5%, compared with a 5% decline in November and 14% drop in October.

Around 37% of the power plants monitored by the Central Electricity Authority is situated in this region.

Abundant rains and high reservoir levels mean a significant part of the incremental demand is being met by hydropower.

Generation in the hydropower segment grew in healthy double digits for the third consecutive month, growing 14% last month. Growth stood at 15% between April and December, the best reading in recent years.

But continued sluggish demand means thermal power generation, which meets most of India’s electricity requirements, remains subdued. Thermal power generation was down 4% in December.

Analysts at SBICAP Securities Ltd estimated the overall energy demand to have fallen by 2% last month. “Energy demand remains weak due to sustained low industry/agriculture demand, but has improved—down only 2% in December 2019 from the high of a 13% fall in October 2019," they said in a note.

Thermal power plants continued to operate at below-par levels. The plant load factor stood at 54% last month, down from 59% in December 2018. Load factors are down a good four percentage points during April-December 2019 from a year ago, implying a long road to recovery.

North and southern regions, which together constitute 46% of all India installed power generation capacity, continued to see weak demand. Generation in these regions declined 11% and 6%, respectively, last month.

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